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How Far Can a Non-Compete Reach (& Still Be Enforceable)?

Jonathan Cooper
Employment Litigation and School Negligence Lawyer

One of the most common questions that comes up in the context of non-compete agreements is this:

How much geographic territory can a non-compete legitimately cover before a New York court will deem it automatically unenforceable?

Unfortunately for many – and contrary to popular belief - there really isn’t a black-and-white answer to this question.

On the other hand, New York’s courts have given us some guidance on the issue. Let’s take a look at two opinions.

In Payment Alliance Intern., Inc. v. Ferreira, 530 F.Supp.2d 477 (S.D.N.Y. 2007), a case that was decided by one of New York’s federal courts in 2007, the court was confronted with an agreement that barred the former employee from competing anywhere in the continental United States. And, believe it or not, that non-compete was upheld.

On the other hand, you have Good Energy, L.P. v. Kosachuk, 49 A.D.3d 331, 332, 853 N.Y.S.2d 75 (1st Dep't 2008), a case from one of New York State’s appellate courts, which invalidated a cross-country non-compete as being overbroad.

Here’s the critical point:

In the first case, the company had a legitimate interest that was worthy of nationwide protection; in the latter case, the former employer only did business in 8 states. Consequently, the court held that they had no reason to bar the employee from working in that field anywhere other than in those 8 states.

Practice Tip:

The takeaway from this should be apparent:

Don't overshoot when setting the geographic parameters of a non-compete; limit it to the areas where your company actually does business.